Drop in Crude Oil Inventories Engenders Mild Crude Oil Price Recovery
Upbeat numbers from the Crude Oil Inventories report have allowed crude oil price on the Brent variety to recover some ground in what had been a bearish week for crude oil. Brent crude is currently trading at 61.87, up from intraday lows of 61.28 after crude oil inventories in the US declined by 400,000 barrels, more than the expected decline of 100,000 barrels of crude. This figure is a far cry from the stockpile drop of 2.5million barrels seen last week. These figures have allowed Brent crude oil price to recover slightly on the day. However, bearish sentiment on crude oil prices persists as markets get spooked by the spread of the novel coronavirus.
Price has effectively broken below the ascending channel on the daily chart which controlled price action between September 2019 till date. I expect Brent crude to resume the downward trajectory as traders may only see today’s slight recovery as an opportunity to sell on rallies.
The immediate target for continued downside price moves is 60.62 (double bottoms of June – July 2019 as well as 20 Nov and 3 Dec lows). A further downside move on Brent crude could target 57.47 (previous lows of 2 Sep and 8 Oct 2019).
Any price recovery has to first break above the initial resistance at this point, which exists at 63.71. 66.98 presents itself as a further resistance, but this area is looking less likely to be tested in the next week as bearish momentum continues to prevail on crude oil prices.